Closing naked put positions

I sell slightly out of the money puts every month. I do it on quality stocks I wouldn't mind owning at those lower prices.
My question is, when do you guys take your profits and close the position? I have a bunch of May puts that are now way out of the money. A lot of people subscribe to the theory that you close your position once you've made 80-85% of the premium not to risk a catastrophic event. If I do that though, I'd be leaving a lot of money on the table every month. Those $0.10 - $0.15 options do add up. Just interested to see what different strategies people use.

Losses add up too. Better to leave $0.15 on the table then steamrolled over if the market reverses hard. I know you are willing to own these stocks but no need to have them forced down your throat if the stock is dropping fast.

1) It's good to offset short-option positions that have lost 80%-90% of their value. At that point, you're "risking a lot to make a little".
2) The "nickels and dimes" that you believe you are missing out on still carry a lot of risk all of the time.
3) If you are concerned about catastrophic risk, you should reduce your position size on outrights or consider trading option-spreads instead if you want to sleep better.

Coach offered a good answer from a risk viewpoint. In terms of profit, wouldn't it make sense to close your current 10 to 15 cent-ers and open some new ones with higher premiums on other stocks that meet your criteria?

Coach offered a good answer from a risk viewpoint. In terms of profit, wouldn't it make sense to close your current 10 to 15 cent-ers and open some new ones with higher premiums on other stocks that meet your criteria?

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Spin and Mark raises a good point that at $0.15 it is time to look at the position like a new one and make a determination whether it is better to go in with a $0.15 reward for that risk or better allocate your resources and risk elsewhere. I think most of the time, as Mark pointed out, you will find a better return in a new position for the same risk more or less.

Spin and Mark raises a good point that at $0.15 it is time to look at the position like a new one and make a determination whether it is better to go in with a $0.15 reward for that risk or better allocate your resources and risk elsewhere. I think most of the time, as Mark pointed out, you will find a better return in a new position for the same risk more or less.

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Thank you all for the replies. To those who say to close those positions and look for new ones, I'd love to do that. But the closer you get to expiration, the harder it is to find a decent premium without being closer to the money (and hence more risk).

Thank you all for the replies. To those who say to close those positions and look for new ones, I'd love to do that. But the closer you get to expiration, the harder it is to find a decent premium without being closer to the money (and hence more risk).

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1) Look at your open position everyday as if you are about to make that new trade, if you wont make that new trade, then close your position. Question, will you write a call/put that has only $0.15 premium with 2 weeks left? If the answer is yes, then leave it open, otherwise close it.

2) You said you are just writing cash covered contracts with the intention to buy the underlying if it goes itm. Then why are you afraid to be "closer" to the money? If you want to buy the stock, you suppose to write atm.

3) There is nothing wrong with holding cash, a lot of option writers think you HAVE to have an open position every sec of the day to get that theta. But keep in mind underlying movement is still the key driver of the option price, if you are having your doubt about the current underlying price/technicals, dont force yourself to write a call just for the sake of having something open to gain that theta.